In policy considerations, modern economists have strongly focused on allocation mechanisms, with far fewer formation mechanisms than called for by evolutionary theory and complex nonequilibrium dynamics. Our fundamental argument is that economics should focus more on those formation mechanisms.
We believe that public policies should be formulated and judged on real-world behavior and their effectiveness in the face of nonmarket interactions among agents, incomplete information, incomplete contracts and pervasive market and government failures. Explicitly, considering complexity and evolution in public policy gives rise to a rich field of inquiry, embracing diversity, bounded rationality, social interaction, path dependence, and self-organization. Admittedly, replacing the rational agent by a more general, satisfactory alternative is difficult as behavior has so many dimensions.
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